Chinese oil refiners expect to boost exports

Refiners in China are likely to boost exports of refined oil products in the period spanning the last two months of 2022 and into early 2023, which will help stabilize global oil markets and quench the worldwide thirst for gasoline and diesel amid the global energy crisis, analysts said.

The rise in those exports will also support the Chinese economy by boosting exports and tapping excess refining capacity, said Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute.

"China's strong electric vehicle sales in 2022 also pose a challenge to gasoline demand recovery, and exports of refined oil products will also help tackle the excess domestic refining capacity," he said.

The PetroChina Planning & Engineering Institute under the China National Petroleum Corp has forecast that the greater use of electric vehicles will result in China's gasoline demand peaking in 2026.

China's refining capacity is growing faster than the demand for its products, creating a lot of potential for exports. Stepping up those exports will also ensure the normal operation of domestic refiners, Luo added.

China's refining capacity is expected to have hit 920 million metric tons in 2022, leveling off at 950 million tons in 2030, according to the CNPC Economics & Technology Research Institute.

The country's refining capacity rose to 910 million tons a year in 2021, overtaking the United States to become the world's top refiner and accounting for more than 18 percent of global refining capacity.

Due to the impact of COVID-19, demand for domestic refined oil products has dropped in China, with the transportation sector suffering the most, while the downstream consumption of the chemical industry continued to grow, according to the CNPC Economics & Technology Research Institute.

It is expected that China's petroleum usage will rise in the second quarter of 2023, when transportation is forecast to make a notable recovery as COVID-19 control policies are further optimized. It may experience a 2 percent growth for the whole year, said the institute's deputy head Jiang Xuefeng during the International Energy Executive Forum jointly held by CNPC and S&P Global Commodity Insights in Beijing in December.

Jiang said that China's 2022 petroleum demand is expected to have dropped 2 percent year-on-year, driven by a 7.3 percent year-on-year decline in oil product consumption, with the COVID-19 pandemic having dampened transportation fuel demand.

According to the institute, the recovery of demand for refined oil products in China has occurred faster than in the rest of the world, and the rapid development of electric vehicles in the country is accelerating the peak of oil product consumption.

At the same time, China's domestic oil production is expected to have risen for the fourth consecutive year in 2022, a trend that is expected to continue in 2023.The country has also been diversifying its crude import sources to ensure energy security, it said.

In August, China set the size of its latest group of oil product export quotas in 2022 at about 15 million tons, including 13.25 million tons of gasoline, diesel and aviation fuel, and 1.75 million tons of low-sulfur marine fuel.

Chinese refineries, especially State-owned refiners, were expected to ramp up output by at least 82 percent, and independent refiners by around 60 percent, to utilize 80 percent of the issued quotas by the end of the year, according to estimates by China-based Longzhong Consultancy.

China exported around 37.25 million tons of refined fuel in 2022, according to the Ministry of Commerce.

Citi analysts said Chinese monthly refined oil product exports might double to 4 million to 5 million tons for the November-December period, and refiners in China are also likely to make the biggest increases in exports of diesel, which has a higher profit margin than gasoline or jet fuel.